Calling Credit Card Gurus

[BlueFlamme]

Originally posted by: brtspears2
It's a trap. 0% on the terms you have to make two purchases is bad news. Even if you buy 2 packs of gum, you will be still hit with a min finance charge. 60 cents of gum = maybe $1.50 of interest a month.

$1.50 a month is worse than the interest on a $14K car loan?

 

[Reckoner]

I could live with $1.50 in interest a month

My current auto loan is at 7%, so even if my payments would go towards the BT instead of the 2 purchases a month, I'd still be making out in the long run. I've been reading the terms and I haven't noticed a mention of them being able to change the terms of the 0% BT, as long as I follow the set guidelines (2 purchases a month, no missed payments, etc). However, is it safe to assume that they can find a way to change the terms in the future if they want to?

 

[Gunslinger08]

I could definitely go for $1.50 a month in interest. Right now I'm paying about $130 a month on a $30k car loan.

 

[randomlinh]

Originally posted by: BlueFlamme

Originally posted by: brtspears2
It's a trap. 0% on the terms you have to make two purchases is bad news. Even if you buy 2 packs of gum, you will be still hit with a min finance charge. 60 cents of gum = maybe $1.50 of interest a month.

$1.50 a month is worse than the interest on a $14K car loan?

start compounding that.... it'll add up if you take too long to pay off the car loan.

 

[kranky]

Originally posted by: randomlinh
my old roommate managed to convince discover to allow a minimium purchase of a QUARTER in order to maintain the 0% BT. He was on the phone for hours... I still have no idea how he managed it. I guess when you blow your money (credit) away on strip clubs heh.

I think your old roommate was pulling your leg. Discover (or any CC issuer) doesn't care at all how small your purchases are. They get paid for every transaction.

If there's going to be an issue with a tiny charge, it's going to be with the merchant. They aren't all that happy about letting someone charge a pack of gum when it will cost the merchant about the same amount in fees.

 

[HomeAppraiser]

I did this Discover 0% BT for life deal last fall and so far so good. I wanted to payoff a $18K HELOC that the rate keeps climbing on, but they only gave me a $8K limit. Apparently there is a limit to the amout of free money they will let you use. I called to complain and they gave me zero fees on the transfer and a nine month grace period before the two purchases a month need to be paid. The Discover reps were very nice and helpful unlike the jerks a Capitol one or the incompetents at Chase. Go for it and enjoy the gum.

 

[GuitarDaddy]

Most of these 0%APR BT have a fairly low limit on the transfer. I'm betting one of two things will happen

1. They won't give you a $14k credit limit
2. They won't give you 0% on the BT because it exceeds the limit


And another thing to remember, the CC company makes all the rules. If at some point they decide to hike the APR they can easily claim you didn't abide by the rules and restrictions, and true or not, at that point the burden of proof is on you. And I can almost guarantee that the CC agreement you will sign with them ultimately gives them control over how much interest they charge. Even if you met every term of the 0% offer to the letter, you chances of winning a legal dispute against them if they decided to up the rate is between slim and none.

 

[Stuxnet]

Originally posted by: kranky
It's a battle of wills. Discover is betting one of three things will happen.

1. You forget to make the two purchases a month at some point, giving them the right to cancel your 0% BT.
2. You pay late, same outcome.
3. You start liking Discover so much, you make bunches of purchases so they start collecting interest from you.

On the other hand, you are betting you will make exactly two very, very small purchases each and every month until the 0% BT is paid off.

Remember that your payment is first applied to the lowest-rate balance, so all your two-a-month purchases will be racking up interest until your 0% BT is fully paid.

You want to read the fine print to see under what conditions you forfeit your 0% BT. If it says that they can change your promotional rate at their discretion if they see anything on your credit report they don't like, then there is risk. But that risk isn't all that great, because if for some reason they try to yank it out from under you, you can always refi into a used car or personal loan using the car as collateral.

There is some risk, no absolute guarantee.

And it might be possible that the Terms and Conditions stipulate that if you make a late purcahse with ANY creditor, you're 0% goes bye-bye. This is becoming more and more common... you might be on time with Credit Card A, but if you're late with Credit Card B, Credit Card A will set you at the default rate.

Be VERY cautious, especially when considering dumping a $14k loan onto the card.

 

[BlueFlamme]

Originally posted by: randomlinh

Originally posted by: BlueFlamme
$1.50 a month is worse than the interest on a $14K car loan?

start compounding that.... it'll add up if you take too long to pay off the car loan.

Going with a 5% rate on the car loan, that means a monthly interest of $58.33. I'll use the same $1.50 you gave for 2 packs of gum and increase the interest by $1.50 for each month.

So going with option A (current car loan) versus option B (CC interest) in 39 months you pay:

Option A: $2275.
Option B: $1140

If you took the typical 60 months to pay off the loan those values would be:

Option A: $3500
Option B: $2700

Am I missing something here? Of course this is a minimilistic approach, but either way the money saved is almost 10% of the original loan which ideally would help pay the loan off quicker and thus have less interest in the end.

 

[dullard]

Originally posted by: BlueFlamme
Am I missing something here?

Yes, read the thread. You are correct, if you do everything just right, you are better to take the 0% transfer, and you'll be quite happy. However, the CC terms are set up so that MOST people will NOT do everything just right. It is human nature to mess up once in a while. Thus, in MOST cases the CC company wins out (otherwise they wouldn't do this deal - think about it).

By the way, your math is horrible. But it doesn't affect anyone's argument (both total interests are far too high), so I won't go into details about it.